|
[
X ]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Maryland
|
04-3578653
|
(State
or other jurisdiction of incorporation
|
(I.R.S.
Employer Identification No.)
|
or
organization)
|
YES [
X ]
|
NO [ ]
|
YES [ ]
|
NO [ ]
|
Large
accelerated filer [ X ]
|
Accelerated
filer [ ]
|
|
Non-accelerated
filer [ ] (Do not check if a smaller
reporting company)
|
Smaller
reporting company [ ]
|
YES [ ]
|
NO [ X
]
|
Part
I.
|
Financial
Information
|
||
Page
|
|||
Item
1.
|
Financial
Statements
|
||
Condensed
Consolidated Balance Sheets as of September 30, 2009 and December 31,
2008
|
4
|
||
Condensed
Consolidated Statements of Income for the three and nine months ended
September 30, 2009 and 2008
|
5
|
||
Condensed
Consolidated Statements of Cash Flows for the nine months ended September
30, 2009 and 2008
|
6
|
||
Condensed
Consolidated Statements of Other Comprehensive Income for the three and
nine months ended September 30, 2009 and 2008
|
7
|
||
Notes
to Condensed Consolidated Financial Statements
|
8-21
|
||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
22-32
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
32
|
|
Item
4.
|
Controls
and Procedures
|
33
|
|
Part II.
|
Other
Information
|
||
Item
1.
|
Legal
Proceedings
|
34
|
|
Item 1A.
|
Risk
Factors
|
34
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
34
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
35
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
35
|
|
Item
5.
|
Other
Information
|
35
|
|
Item
6.
|
Exhibits
|
35
|
|
Signatures
|
36
|
Item
1.
|
Financial
Statements
|
September 30,
|
December 31,
|
|||||||
(in
thousands, except share and par value amounts)
|
2009
|
2008
|
||||||
Assets:
|
||||||||
Real
estate assets:
|
||||||||
Land
|
$ | 126,695 | $ | 107,153 | ||||
Buildings
and improvements
|
891,918 | 810,732 | ||||||
Fixtures
and equipment
|
310 | 299 | ||||||
1,018,923 | 918,184 | |||||||
Less
accumulated depreciation
|
92,368 | 74,126 | ||||||
Real
estate assets, net
|
926,555 | 844,058 | ||||||
Acquired
real estate leases, less accumulated amortization
|
||||||||
of
$35,106 and $29,200, respectively
|
48,003 | 28,518 | ||||||
Investment
in non-consolidated REITs
|
93,936 | 83,046 | ||||||
Assets
held for syndication, net
|
- | 13,254 | ||||||
Cash
and cash equivalents
|
26,385 | 29,244 | ||||||
Restricted
cash
|
331 | 336 | ||||||
Tenant
rent receivables, less allowance for doubtful accounts
|
||||||||
of
$620 and $509, respectively
|
1,400 | 1,329 | ||||||
Straight-line
rent receivable, less allowance for doubtful accounts
|
||||||||
of
$100 and $261, respectively
|
9,724 | 8,816 | ||||||
Prepaid
expenses
|
3,430 | 2,206 | ||||||
Related
party mortgage loan receivable
|
23,264 | 1,125 | ||||||
Other
assets
|
1,452 | 2,406 | ||||||
Office
computers and furniture, net of accumulated depreciation
|
||||||||
of
$1,194 and $1,108, respectively
|
408 | 281 | ||||||
Deferred
leasing commissions, net of accumulated amortization
|
||||||||
of
$4,820, and $3,416, respectively
|
10,887 | 10,814 | ||||||
Total
assets
|
$ | 1,145,775 | $ | 1,025,433 | ||||
Liabilities
and Stockholders’ Equity:
|
||||||||
Liabilities:
|
||||||||
Bank
note payable
|
$ | 91,008 | $ | 67,468 | ||||
Term
loan payable
|
75,000 | 75,000 | ||||||
Accounts
payable and accrued expenses
|
25,351 | 22,297 | ||||||
Accrued
compensation
|
750 | 1,654 | ||||||
Tenant
security deposits
|
1,757 | 1,874 | ||||||
Other
liabilities: derivative termination value
|
2,269 | 3,099 | ||||||
Acquired
unfavorable real estate leases, less accumulated
amortization
|
||||||||
of
$2,440, and $1,779, respectively
|
5,661 | 5,044 | ||||||
Total
liabilities
|
201,796 | 176,436 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders’
Equity:
|
||||||||
Preferred
stock, $.0001 par value, 20,000,000 shares authorized, none issued or
outstanding
|
- | - | ||||||
Common
stock, $.0001 par value, 180,000,000 shares authorized,
79,680,705
and 70,480,705 shares issued and outstanding, respectively
|
8 | 7 | ||||||
Additional
paid-in capital
|
1,003,729 | 889,019 | ||||||
Accumulated
other comprehensive loss
|
(2,269 | ) | (3,099 | ) | ||||
Accumulated
distributions in excess of accumulated earnings
|
(57,489 | ) | (36,930 | ) | ||||
Total
stockholders’ equity
|
943,979 | 848,997 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 1,145,775 | $ | 1,025,433 | ||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
|
For
the
Three
Months Ended
September
30,
|
For
the
Nine
Months Ended
September
30,
|
|||||||||||||||
(in
thousands, except per share amounts)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Revenue:
|
||||||||||||||||
Rental
|
$ | 31,702 | $ | 27,927 | $ | 90,774 | $ | 82,283 | ||||||||
Related
party revenue:
|
||||||||||||||||
Syndication
fees
|
- | 304 | 39 | 3,766 | ||||||||||||
Transaction
fees
|
1 | 300 | 543 | 3,606 | ||||||||||||
Management
fees and interest income from loans
|
370 | 380 | 1,232 | 1,364 | ||||||||||||
Other
|
19 | 13 | 55 | 52 | ||||||||||||
Total
revenue
|
32,092 | 28,924 | 92,643 | 91,071 | ||||||||||||
Expenses:
|
||||||||||||||||
Real
estate operating expenses
|
7,752 | 7,159 | 22,176 | 20,973 | ||||||||||||
Real
estate taxes and insurance
|
5,364 | 4,590 | 14,879 | 13,375 | ||||||||||||
Depreciation
and amortization
|
8,801 | 7,666 | 26,940 | 22,616 | ||||||||||||
Selling,
general and administrative
|
2,243 | 1,927 | 6,378 | 6,557 | ||||||||||||
Commissions
|
8 | 208 | 178 | 2,020 | ||||||||||||
Interest
|
1,744 | 1,108 | 4,920 | 3,351 | ||||||||||||
Total
expenses
|
25,912 | 22,658 | 75,471 | 68,892 | ||||||||||||
Income
before interest income, equity in earnings of
|
||||||||||||||||
non-consolidated
REITs and taxes
|
6,180 | 6,266 | 17,172 | 22,179 | ||||||||||||
Interest
income
|
16 | 177 | 88 | 657 | ||||||||||||
Equity
in earnings of non-consolidated REITs
|
475 | 679 | 1,710 | 2,167 | ||||||||||||
Income
before taxes
|
6,671 | 7,122 | 18,970 | 25,003 | ||||||||||||
Income
tax benefit
|
(270 | ) | (297 | ) | (644 | ) | (337 | ) | ||||||||
Net
income
|
$ | 6,941 | $ | 7,419 | $ | 19,614 | $ | 25,340 | ||||||||
Weighted
average number of shares outstanding,
|
||||||||||||||||
basic
and diluted
|
71,281 | 70,481 | 70,750 | 70,481 | ||||||||||||
Net
income per share, basic and diluted
|
$ | 0.10 | $ | 0.11 | $ | 0.28 | $ | 0.36 | ||||||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
|
For
the
Nine
Months Ended
September
30,
|
||||||||
(in
thousands)
|
2009
|
2008
|
||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 19,614 | $ | 25,340 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization expense
|
27,141 | 22,649 | ||||||
Amortization
of above market lease
|
2,544 | 3,376 | ||||||
Equity
in earnings of non-consolidated REITs
|
(1,710 | ) | (2,167 | ) | ||||
Distributions
from non-consolidated REITs
|
4,257 | 3,838 | ||||||
Increase
in bad debt reserve
|
111 | 79 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Restricted
cash
|
5 | - | ||||||
Tenant
rent receivables, net
|
(182 | ) | 219 | |||||
Straight-line
rents, net
|
(849 | ) | (854 | ) | ||||
Prepaid
expenses and other assets, net
|
(472 | ) | (1,474 | ) | ||||
Accounts
payable, accrued expenses
|
4,294 | 3,863 | ||||||
Accrued
compensation
|
(904 | ) | 88 | |||||
Tenant
security deposits
|
(117 | ) | (51 | ) | ||||
Payment
of deferred leasing commissions
|
(2,202 | ) | (2,434 | ) | ||||
Net
cash provided by operating activities
|
51,530 | 52,472 | ||||||
Cash
flows from investing activities:
|
||||||||
Purchase
of real estate assets, office computers and furniture,
capitalized merger costs and acquired real estate leases |
(130,819 | ) | (39,282 | ) | ||||
Investment
in non-consolidated REITs
|
(13,200 | ) | (10 | ) | ||||
Investment
in related party mortgage loan receivable
|
(22,139 | ) | (1,125 | ) | ||||
Investment
in assets held for syndication
|
13,017 | 12,235 | ||||||
Net
cash used in investing activities
|
(153,141 | ) | (28,182 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Distributions
to stockholders
|
(40,173 | ) | (57,089 | ) | ||||
Proceeds
from equity offering, net
|
115,385 | - | ||||||
Borrowings
under bank note payable
|
23,540 | 20,368 | ||||||
Deferred
financing costs
|
- | (30 | ) | |||||
Net
cash provided by (used in) financing activities
|
98,752 | (36,751 | ) | |||||
Net
decrease in cash and cash equivalents
|
(2,859 | ) | (12,461 | ) | ||||
Cash
and cash equivalents, beginning of period
|
29,244 | 46,988 | ||||||
Cash
and cash equivalents, end of period
|
$ | 26,385 | $ | 34,527 | ||||
|
||||||||
Non-cash
investing and financing activities:
|
||||||||
Accrued
costs for purchase of real estate assets
|
$ | - | $ | 2,027 | ||||
Accrued
costs for equity offering
|
$ | 674 | $ | - | ||||
Investment
in non-consolidated REITs converted to real estate assets
|
||||||||
and
acquired real estate leases in conjunction with merger
|
$ | - | $ | 1,162 | ||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
|
For
the
Three
Months Ended
September
30,
|
For
the
Nine
Months Ended
September
30,
|
|||||||||||||||
(in
thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Net
income
|
$ | 6,941 | $ | 7,419 | $ | 19,614 | $ | 25,340 | ||||||||
Other
comprehensive income:
|
||||||||||||||||
Unrealized
gain on derivative financial instruments
|
125 | - | 830 | - | ||||||||||||
Total
other comprehensive income
|
125 | - | 830 | - | ||||||||||||
Comprehensive
income
|
$ | 7,066 | $ | 7,419 | $ | 20,444 | $ | 25,340 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements. |
1.
|
Organization,
Properties, Basis of Presentation, Financial Instruments and Recent
Accounting Standards
|
As
of September 30,
|
|||
2009
|
2008
|
||
Commercial
real estate:
|
|||
Number
of properties
|
32
|
27
|
|
Rentable
square feet
|
5,934,624
|
5,066,813
|
1.
|
Organization,
Properties, Basis of Presentation, Financial Instruments and Recent
Accounting Standards (continued)
|
2.
|
Investment
Banking/Investment Services
Activity
|
Sponsored
REIT
|
Property
Location
|
Gross
Proceeds (1) |
|||
(in thousands)
|
|||||
FSP
Grand Boulevard Corp.
|
Kansas
City, MO
|
$ | 350 | ||
FSP
385 Interlocken Development Corp.
|
Broomfield,
CO
|
200 | |||
FSP
Lakeside Crossing II Corp.
|
Maryland
Heights, MO
|
- | |||
Total
|
$ | 550 |
3.
|
Related
Party Transactions and Investments in Non-Consolidated
Entities
|
Nine
Months Ended
|
||||||||
September
30,
|
||||||||
(in
thousands)
|
2009
|
2008
|
||||||
Equity
in earnings of Sponsored REITs
|
$ | 141 | $ | 133 | ||||
Equity
in earnings of Park Ten Development
|
- | 10 | ||||||
Equity
in earnings of Phoenix Tower
|
11 | 18 | ||||||
Equity
in earnings of East Wacker
|
1,441 | 2,006 | ||||||
Equity
in earnings of Grand Boulevard
|
117 | - | ||||||
$ | 1,710 | $ | 2,167 |
3.
|
Related
Party Transactions and Investments in Non-consolidated Entities
(continued)
|
September 30,
|
December 31,
|
|||||||
(in
thousands)
|
2009
|
2008
|
||||||
Balance Sheet Data
(unaudited):
|
||||||||
Real
estate, net
|
$ | 675,950 | $ | 683,218 | ||||
Other
assets
|
103,825 | 114,015 | ||||||
Total
liabilities
|
(199,269 | ) | (189,435 | ) | ||||
Shareholders'
equity
|
$ | 580,506 | $ | 607,798 |
For the Nine Months Ended
|
||||||||
September
30,
|
||||||||
(in
thousands)
|
2009
|
2008
|
||||||
Operating Data
(unaudited):
|
||||||||
Rental
revenues
|
$ | 71,966 | $ | 76,023 | ||||
Other
revenues
|
327 | 1,638 | ||||||
Operating
and maintenance expenses
|
(38,178 | ) | (40,303 | ) | ||||
Depreciation
and amortization
|
(18,330 | ) | (17,805 | ) | ||||
Interest
expense
|
(6,225 | ) | (7,970 | ) | ||||
Net
income
|
$ | 9,560 | $ | 11,583 |
3.
|
Related
Party Transactions and Investments in Non-consolidated Entities
(continued)
|
3.
|
Related
Party Transactions and Investments in Non-consolidated Entities
(continued)
|
(dollars
in 000's)
|
Maximum
|
Amount
|
Rate
in
|
|||
Maturity
|
Amount
|
Drawn
at
|
Interest
|
Draw
|
Effect
at
|
|
Sponsored
REIT
|
Date
|
of
Loan
|
30-Sep-09
|
Rate
(1)
|
Fee
(2)
|
30-Sep-09
|
Revolving
lines of credit
|
||||||
FSP
Highland Place I Corp.
|
31-Dec-10
|
$ 5,500
|
$ 1,125
|
L+2%
|
n/a
|
2.26%
|
FSP
Satellite Place Corp.
|
31-Mar-12
|
5,500
|
1,302
|
L+3%
|
0.5%
|
3.26%
|
FSP
1441 Main Street Corp.(a)
|
31-Mar-12
|
10,800
|
1,250
|
L+3%
|
0.5%
|
3.26%
|
FSP
505 Waterford Corp.
|
30-Nov-11
|
7,000
|
-
|
L+3%
|
0.5%
|
|
FSP
Phoenix Tower Corp. (b)
|
30-Nov-11
|
15,000
|
3,600
|
L+3%
|
0.5%
|
3.26%
|
Construction
loan
|
||||||
FSP
385 Interlocken
|
||||||
Development
Corp. (c)
|
30-Apr-12
|
42,000
|
15,987
|
L+3%
|
n/a
|
3.26%
|
$ 85,800
|
$ 23,264
|
|||||
(1)
The interest rate is 30-Day LIBOR rate plus the additional rate
indicated
(2)
The draw fee is a percentage of each new advance, and is paid at the time
of each new draw
(a)
The Borrower is FSP 1441 Main Street LLC, a wholly-owned
subsidiary
(b)
The Borrower is FSP Phoenix Tower Limited Partnership, a wholly-owned
subsidiary
(c)
The Borrower is FSP 385 Interlocken LLC, a wholly-owned
subsidiary
|
4.
|
Bank
note payable and term note payable
|
4.
|
Bank
note payable and term note payable
(continued)
|
5.
|
Net
Income Per Share
|
6.
|
Financial
Instruments: Derivatives and
Hedging
|
Notional
Value
|
Strike
Rate
|
Effective
Date
|
Expiration
Date
|
Fair
Value
|
||||||
Interest
Rate Swap
|
$ 75,000
|
5.840%
|
10/2008
|
10/2011
|
$ (2,269)
|
6.
|
Financial
Instruments: Derivatives and Hedging
(continued)
|
7.
|
Stockholders'
Equity
|
Quarter
Paid
|
Dividends
Per
Share
|
Total
Dividends |
||
First
quarter of 2009
|
$ 0.19
|
$13,391
|
||
Second
quarter of 2009
|
$ 0.19
|
$13,391
|
||
Third
quarter of 2009
|
$ 0.19
|
$13,391
|
||
First
quarter of 2008
|
$ 0.31
|
$21,849
|
||
Second
quarter of 2008
|
$ 0.31
|
$21,849
|
||
Third
quarter of 2008
|
$ 0.19
|
$13,391
|
8.
|
Business
Segments
|
8.
|
Business
Segments (continued)
|
(in
thousands)
|
Real
Estate
Operations
|
Investment
Banking/
Investment
Services
|
Total
|
|||||||||
Three
Months Ended March 31, 2009
|
||||||||||||
Net
Income (loss)
|
$ | 8,586 | $ | (778 | ) | $ | 7,808 | |||||
Equity
in income of non-consolidated REITs
|
(792 | ) | - | (792 | ) | |||||||
Distributions
from non-consolidated REITs
|
1,615 | - | 1,615 | |||||||||
Depreciation
and amortization
|
8,680 | 27 | 8,707 | |||||||||
Funds
From Operations
|
$ | 18,089 | $ | (751 | ) | $ | 17,338 | |||||
Three
Months Ended June 30, 2009
|
||||||||||||
Net
Income (loss)
|
$ | 5,212 | $ | (347 | ) | $ | 4,865 | |||||
Equity
in income of non-consolidated REITs
|
(443 | ) | - | (443 | ) | |||||||
Distributions
from non-consolidated REITs
|
1,523 | - | 1,523 | |||||||||
Acquisition
costs
|
248 | - | 248 | |||||||||
Depreciation
and amortization
|
11,191 | 25 | 11,216 | |||||||||
Funds
From Operations
|
$ | 17,731 | $ | (322 | ) | $ | 17,409 | |||||
Six
Months Ended June 30, 2009
|
||||||||||||
Net
Income (loss)
|
$ | 13,798 | $ | (1,125 | ) | $ | 12,673 | |||||
Equity
in income of non-consolidated REITs
|
(1,235 | ) | - | (1,235 | ) | |||||||
Distributions
from non-consolidated REITs
|
3,138 | - | 3,138 | |||||||||
Acquisition
costs
|
248 | - | 248 | |||||||||
Depreciation
and amortization
|
19,871 | 52 | 19,923 | |||||||||
Funds
From Operations
|
$ | 35,820 | $ | (1,073 | ) | $ | 34,747 | |||||
Three
Months Ended September 30, 2009
|
||||||||||||
Net
Income (loss)
|
$ | 7,566 | $ | (625 | ) | $ | 6,941 | |||||
Equity
in income of non-consolidated REITs
|
(475 | ) | - | (475 | ) | |||||||
Distributions
from non-consolidated REITs
|
1,119 | - | 1,119 | |||||||||
Acquisition
costs
|
391 | - | 391 | |||||||||
Depreciation
and amortization
|
9,528 | 33 | 9,561 | |||||||||
Funds
From Operations
|
$ | 18,129 | $ | (592 | ) | $ | 17,537 | |||||
Nine
Months Ended September 30, 2009
|
||||||||||||
Net
Income (loss)
|
$ | 21,364 | $ | (1,750 | ) | $ | 19,614 | |||||
Equity
in income of non-consolidated REITs
|
(1,710 | ) | - | (1,710 | ) | |||||||
Distributions
from non-consolidated REITs
|
4,257 | - | 4,257 | |||||||||
Acquisition
costs
|
639 | - | 639 | |||||||||
Depreciation
and amortization
|
29,399 | 85 | 29,484 | |||||||||
Funds
From Operations
|
$ | 53,949 | $ | (1,665 | ) | $ | 52,284 |
8.
|
Business
Segments (continued)
|
Real
Estate
Operations
|
Investment
Banking/
Investment
Services
|
Total
|
||||||||||
Three
Months Ended March 31, 2008
|
||||||||||||
Net
Income (loss)
|
$ | 7,874 | $ | (488 | ) | $ | 7,386 | |||||
Equity
in income of non-consolidated REITs
|
(793 | ) | - | (793 | ) | |||||||
Distributions
from non-consolidated REITs
|
546 | - | 546 | |||||||||
Depreciation
and amortization
|
8,464 | 34 | 8,498 | |||||||||
Funds
From Operations
|
$ | 16,091 | $ | (454 | ) | $ | 15,637 | |||||
Three
Months Ended June 30, 2008
|
||||||||||||
Net
Income
|
$ | 7,182 | $ | 3,352 | $ | 10,534 | ||||||
Equity
in income of non-consolidated REITs
|
(694 | ) | - | (694 | ) | |||||||
Distributions
from non-consolidated REITs
|
1,731 | - | 1,731 | |||||||||
Depreciation
and amortization
|
8,677 | 35 | 8,712 | |||||||||
Funds
From Operations
|
$ | 16,896 | $ | 3,387 | $ | 20,283 | ||||||
Six
Months Ended June 30, 2008
|
||||||||||||
Net
Income
|
$ | 15,056 | $ | 2,864 | $ | 17,920 | ||||||
Equity
in income of non-consolidated REITs
|
(1,487 | ) | - | (1,487 | ) | |||||||
Distributions
from non-consolidated REITs
|
2,277 | - | 2,277 | |||||||||
Depreciation
and amortization
|
17,141 | 69 | 17,210 | |||||||||
Funds
From Operations
|
$ | 32,987 | $ | 2,933 | $ | 35,920 | ||||||
Three
Months Ended September 30, 2008
|
||||||||||||
Net
Income (loss)
|
$ | 7,672 | $ | (253 | ) | $ | 7,419 | |||||
Equity
in losses of non-consolidated REITs
|
(679 | ) | - | (679 | ) | |||||||
Distributions
from non-consolidated REITs
|
1,561 | - | 1,561 | |||||||||
Depreciation
and amortization
|
8,747 | 37 | 8,784 | |||||||||
Funds
From Operations
|
$ | 17,301 | $ | (216 | ) | $ | 17,085 | |||||
Nine
Months Ended September 30, 2008
|
||||||||||||
Net
Income
|
$ | 22,729 | $ | 2,611 | $ | 25,340 | ||||||
Equity
in losses of non-consolidated REITs
|
(2,167 | ) | - | (2,167 | ) | |||||||
Distributions
from non-consolidated REITs
|
3,838 | - | 3,838 | |||||||||
Depreciation
and amortization
|
25,888 | 106 | 25,994 | |||||||||
Funds
From Operations
|
$ | 50,288 | $ | 2,717 | $ | 53,005 |
8.
|
Business
Segments (continued)
|
Real
Estate
Operations
|
Investment
Banking/
Investment
Services
|
Total
|
||||||||||
Three
Months Ended September 30, 2009
|
||||||||||||
Revenue
|
$ | 32,091 | $ | 1 | $ | 32,092 | ||||||
Interest
income
|
16 | - | 16 | |||||||||
Interest
expense
|
1,744 | - | 1,744 | |||||||||
Capital
expenditures
|
1,818 | 23 | 1,841 | |||||||||
Nine
Months Ended September 30, 2009
|
||||||||||||
Revenue
|
$ | 92,061 | $ | 582 | $ | 92,643 | ||||||
Interest
income
|
85 | 3 | 88 | |||||||||
Interest
expense
|
4,920 | - | 4,920 | |||||||||
Investment
in non-consolidated REITs
|
93,936 | - | 93,936 | |||||||||
Capital
expenditures
|
6,053 | 212 | 6,265 | |||||||||
Identifiable
assets as of September 30, 2009
|
$ | 1,142,459 | $ | 3,316 | $ | 1,145,775 | ||||||
Three
Months Ended September 30, 2008
|
||||||||||||
Revenue
|
$ | 28,320 | $ | 604 | $ | 28,924 | ||||||
Interest
income
|
167 | 10 | 177 | |||||||||
Interest
expense
|
1,108 | - | 1,108 | |||||||||
Capital
expenditures
|
2,407 | - | 2,407 | |||||||||
Nine
Months Ended September 30, 2008
|
||||||||||||
Revenue
|
$ | 83,699 | $ | 7,372 | $ | 91,071 | ||||||
Interest
income
|
629 | 28 | 657 | |||||||||
Interest
expense
|
3,351 | - | 3,351 | |||||||||
Investment
in non-consolidated REITs
|
83,896 | - | 83,896 | |||||||||
Capital
expenditures
|
5,874 | - | 5,874 | |||||||||
Identifiable
Assets as of September 30, 2008
|
$ | 991,487 | $ | 5,573 | $ | 997,060 |
9.
|
Income
Taxes
|
For
the
|
||||||||
Nine
Months Ended
|
||||||||
September
30,
|
||||||||
(in
thousands)
|
2009
|
2008
|
||||||
Federal
income tax benefit
|
$ | (830 | ) | $ | (438 | ) | ||
Increase
(decrease) in taxes resulting from:
|
||||||||
State
income tax benefit, net of federal impact
|
(158 | ) | (81 | ) | ||||
Valuation
allowance on state tax benefit
|
158 | |||||||
Revised
Texas franchise tax
|
186 | 182 | ||||||
Income
tax benefit
|
$ | (644 | ) | $ | (337 | ) |
9.
|
Income
Taxes (continued)
|
10.
|
Subsequent
Events
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
(in
thousands)
|
||||||||||||
Three
months ended September 30,
|
||||||||||||
Revenue:
|
2009
|
2008
|
Change
|
|||||||||
Rental
|
$ | 31,702 | $ | 27,927 | $ | 3,775 | ||||||
Related
party revenue:
|
||||||||||||
Syndication
fees
|
- | 304 | (304 | ) | ||||||||
Transaction
fees
|
1 | 300 | (299 | ) | ||||||||
Management
fees and interest income from loans
|
370 | 380 | (10 | ) | ||||||||
Other
|
19 | 13 | 6 | |||||||||
Total
revenue
|
32,092 | 28,924 | 3,168 | |||||||||
Expenses:
|
||||||||||||
Real
estate operating expenses
|
7,752 | 7,159 | 593 | |||||||||
Real
estate taxes and insurance
|
5,364 | 4,590 | 774 | |||||||||
Depreciation
and amortization
|
8,801 | 7,666 | 1,135 | |||||||||
Selling,
general and administrative
|
2,243 | 1,927 | 316 | |||||||||
Commissions
|
8 | 208 | (200 | ) | ||||||||
Interest
|
1,744 | 1,108 | 636 | |||||||||
Total
expenses
|
25,912 | 22,658 | 3,254 | |||||||||
Income
before interest income, equity in earnings in
non-consolidated
REITs and taxes
|
6,180 | 6,266 | (86 | ) | ||||||||
Interest
income
|
16 | 177 | (161 | ) | ||||||||
Equity
in earnings of non-consolidated REITs
|
475 | 679 | (204 | ) | ||||||||
Income
before taxes
|
6,671 | 7,122 | (451 | ) | ||||||||
Income
tax expense (benefit)
|
(270 | ) | (297 | ) | 27 | |||||||
Net
income
|
$ | 6,941 | $ | 7,419 | $ | (478 | ) |
|
o
|
An
increase in rental revenue of approximately $3.8 million arising primarily
from the acquisition of four properties, which were located in Virginia
and Missouri that were acquired in December 2008, and in Virginia and
Minnesota that were acquired in June 2009, and to a lesser extent, early
termination fees of $0.4 million received during the three months ended
September 30, 2009.
|
|
o
|
A
$0.6 million decrease in syndication fees and transaction (loan
commitment) fees, which was principally a result of the decrease in gross
syndication proceeds for the quarter ended September 30, 2009 compared to
the same period in 2008.
|
|
o
|
An
increase in real estate operating expenses and real estate taxes and
insurance of approximately $1.4 million, and depreciation of $1.1 million,
which were primarily from the acquisition of four properties, which were
located in Virginia and Missouri that were acquired in December 2008, and
in Virginia and Minnesota that were acquired in June
2009.
|
|
o
|
An
increase in interest expense of approximately $0.6 million primarily as a
result of the addition of the Term Loan, which was borrowed in October
2008; and was partially offset by lower average interest rates during the
three months ended September 30, 2009 compared to the three months ended
September 30, 2008.
|
|
o
|
An
increase in general and administrative expenses of $0.3 million, which was
primarily the result of acquisition costs of $0.4 million that were
recorded in the three months ended September 30, 2009 related to the
acquisition of a property in Virginia completed in September 2009. We had
41 and 40 employees as of September 30, 2009 and 2008, respectively, at
our headquarters in Wakefield.
|
|
o
|
A
decrease in commission expense of $0.2 million, which was principally a
result of the decrease in gross syndication proceeds in the three months
ended September 30, 2009 as compared to the three months ended September
30, 2008.
|
(in
thousands)
|
||||||||||||
Nine
months ended September 30,
|
||||||||||||
Revenue:
|
2009
|
2008
|
Change
|
|||||||||
Rental
|
$ | 90,774 | $ | 82,283 | $ | 8,491 | ||||||
Related
party revenue:
|
||||||||||||
Syndication
fees
|
39 | 3,766 | (3,727 | ) | ||||||||
Transaction
fees
|
543 | 3,606 | (3,063 | ) | ||||||||
Management
fees and interest income from loans
|
1,232 | 1,364 | (132 | ) | ||||||||
Other
|
55 | 52 | 3 | |||||||||
Total
revenue
|
92,643 | 91,071 | 1,572 | |||||||||
Expenses:
|
||||||||||||
Real
estate operating expenses
|
22,176 | 20,973 | 1,203 | |||||||||
Real
estate taxes and insurance
|
14,879 | 13,375 | 1,504 | |||||||||
Depreciation
and amortization
|
26,940 | 22,616 | 4,324 | |||||||||
Selling,
general and administrative
|
6,378 | 6,557 | (179 | ) | ||||||||
Commissions
|
178 | 2,020 | (1,842 | ) | ||||||||
Interest
|
4,920 | 3,351 | 1,569 | |||||||||
Total
expenses
|
75,471 | 68,892 | 6,579 | |||||||||
Income
before interest income, equity in earnings (losses) in
non-consolidated
REITs and taxes
|
17,172 | 22,179 | (5,007 | ) | ||||||||
Interest
income
|
88 | 657 | (569 | ) | ||||||||
Equity
in earnings in non-consolidated REITs
|
1,710 | 2,167 | (457 | ) | ||||||||
Income
before taxes
|
18,970 | 25,003 | (6,033 | ) | ||||||||
Income
tax benefit
|
(644 | ) | (337 | ) | (307 | ) | ||||||
Net
income
|
$ | 19,614 | $ | 25,340 | $ | (5,726 | ) |
|
o
|
An
increase to rental revenue of approximately $8.5 million arising primarily
from the acquisition of a property in Texas in May 2008, the acquisition
of two properties located in Virginia and Missouri in December 2008, and
the acquisition of two properties located in Virginia and Minnesota that
were acquired in June 2009, and early termination fees of $0.8 million
received during the nine months ended September 30,
2009.
|
|
o
|
A
$6.8 million decrease in syndication fees and transaction (loan
commitment) fees, which was principally a result of the decrease in gross
syndication proceeds for the nine months ended September 30, 2009 compared
to the same period in 2008.
|
|
o
|
A
decrease in loan interest income of approximately $0.1 million, which was
principally a result of lower interest rates charged during the nine
months ended September 30, 2009 as compared the nine months ended
September 30, 2008, from which interest income is derived. Interest rates
charged are primarily based on our borrowing costs, which are at floating
rates and were also lower during the periods in 2009 than
2008.
|
|
o
|
An
increase in real estate operating expenses and real estate taxes and
insurance of approximately $2.7 million, and depreciation and amortization
of $4.3 million, which were primarily from the acquisition of a property
in Texas in May 2008, the acquisition of two properties located in
Virginia and Missouri in December 2008, and the acquisition of two
properties located in Virginia and Minnesota that were acquired in June
2009.
|
|
o
|
An
increase in interest expense of approximately $1.6 million primarily as a
result of the addition of the Term Loan, which was borrowed in October
2008; and was partially offset by lower average interest rates during the
nine months ended September 30, 2009 compared to the nine months ended
September 30, 2008.
|
|
o
|
A
decrease in general and administrative expenses of $0.2 million, which was
primarily the result of a net decrease in discretionary and other
compensation costs of $0.7 million, which was partially offset by an
increase from acquisition costs of $0.6 million that were recorded in the
nine months ended September 30, 2009 related to the acquisition of two
properties in June 2009 and the acquisition of a property in September
2009. We had 41 and 40 employees as of September 30, 2009 and 2008,
respectively, at our headquarters in
Wakefield.
|
|
o
|
A
decrease in commission expense of $1.8 million, which was principally a
result of the decrease in gross syndication proceeds in the nine months
ended September 30, 2009 compared to the same period in
2008.
|
(dollars
in 000's)
|
Maximum
|
Amount
|
Rate
in
|
|||
Maturity
|
Amount
|
Drawn
at
|
Interest
|
Draw
|
Effect
at
|
|
Sponsored
REIT
|
Date
|
of
Loan
|
30-Sep-09
|
Rate
(1)
|
Fee
(2)
|
30-Sep-09
|
Revolving
lines of credit
|
||||||
FSP
Highland Place I Corp.
|
31-Dec-10
|
$ 5,500
|
$ 1,125
|
L+2%
|
n/a
|
2.26%
|
FSP
Satellite Place Corp.
|
31-Mar-12
|
5,500
|
1,302
|
L+3%
|
0.5%
|
3.26%
|
FSP
1441 Main Street Corp.(a)
|
31-Mar-12
|
10,800
|
1,250
|
L+3%
|
0.5%
|
3.26%
|
FSP
505 Waterford Corp.
|
30-Nov-11
|
7,000
|
-
|
L+3%
|
0.5%
|
|
FSP
Phoenix Tower Corp. (b)
|
30-Nov-11
|
15,000
|
3,600
|
L+3%
|
0.5%
|
3.26%
|
Construction
loan
|
||||||
FSP
385 Interlocken
|
||||||
Development
Corp. (c)
|
30-Apr-12
|
42,000
|
15,987
|
L+3%
|
n/a
|
3.26%
|
$ 85,800
|
$ 23,264
|
|||||
(1)
The interest rate is 30-Day LIBOR rate plus the additional rate
indicated
(2)
The draw fee is a percentage of each new advance, and is paid at the time
of each new draw
(a)
The Borrower is FSP 1441 Main Street LLC, a wholly-owned
subsidiary
(b)
The Borrower is FSP Phoenix Tower Limited Partnership, a wholly-owned
subsidiary
(c)
The Borrower is FSP 385 Interlocken LLC, a wholly-owned
subsidiary
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
|
Notional
Value
|
|
Strike
Rate
|
Effective
Date
|
|
Expiration
Date
|
|
Fair
Value
|
|
|||
Interest
Rate Swap
|
|
$
75,000
|
5.840%
|
10/2008
|
10/2011
|
$
(2,269)
|
|
Payment
due by period
|
|||||||
(in
thousands)
|
|||||||
Total
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
Revolver
(1)
|
$ 91,008
|
$ -
|
$
-
|
$ 91,008
|
$ -
|
$ -
|
$ -
|
Term
Loan
|
75,000
|
-
|
150
|
74,850
|
-
|
-
|
-
|
Total
|
$ 166,008
|
$ -
|
$ 150
|
$ 165,858
|
$ -
|
$ -
|
$ -
|
(1)
The Revolver maturity is in 2011, however borrowings made thereunder are
with 30-Day LIBOR advances, which are due or can be renewed at
maturity.
|
Item
4.
|
Controls
and Procedures
|
Item
1.
|
Legal
Proceedings
|
Item
1A.
|
Risk
Factors
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
Period
|
(a)
Total
Number of
Shares
(or Units)
Purchased
(1) (2)
|
(b)
Average
Price
Paid
per Share
(or
Unit)
|
(c)
Total
Number of
Shares
(or Units)
Purchased
as Part
of
Publicly
Announced
Plans
or
Programs
(1)
(2)
|
(d)
Maximum
Number (or
Approximate
Dollar
Value)
of Shares (or
Units)
that May Yet Be
Purchased
Under the
Plans
or Programs
(1)
(2)
|
07/01/09-07/31/09
|
0
|
N/A
|
0
|
$31,240,465
|
08/01/09-08/31/09
|
0
|
N/A
|
0
|
$31,240,465
|
09/01/09-09/30/09
|
0
|
N/A
|
0
|
$31,240,465
|
Total:
|
0
|
N/A
|
0
|
$31,240,465
|
Item
3.
|
Defaults
Upon Senior Securities
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
Item
5.
|
Other
Information
|
Item
6.
|
Exhibits
|
Date
|
Signature
|
Title
|
Date: November
3, 2009
|
/s/ George J.
Carter
George
J. Carter
|
Chief
Executive Officer and Director
(Principal Executive Officer) |
Date: November
3, 2009
|
/s/ John G.
Demeritt
John
G. Demeritt
|
Chief
Financial Officer
(Principal
Financial Officer)
|
Exhibit No.
|
Description
|
3.1
(1)
|
Articles
of Incorporation.
|
3.2
(2)
|
Amended
and Restated By-laws.
|
10.1
(3)
|
Underwriting
Agreement dated September 17, 2009 by and between FSP Corp. and Robert W.
Baird & Co. Incorporated.
|
31.1*
|
Certification
of FSP Corp.’s President and Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
|
31.2*
|
Certification
of FSP Corp.’s Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1*
|
Certification
of FSP Corp.’s President and Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
32.2*
|
Certification
of FSP Corp.’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
(1)
|
Incorporated
by reference to FSP Corp.’s Form 8-A, filed on April 5, 2005 (File No.
001-32470).
|
(2)
|
Incorporated
by reference to FSP Corp.’s Current Report on Form 8-K, filed on May 15,
2006 (File No. 001-32470).
|
(3)
|
Incorporated
by reference to FSP Corp.’s Current Report on Form 8-K, filed on September
23, 2009 (File No. 001-32470).
|
*
|
Filed
herewith.
|